Merrill Lynch Hit with $40 Million FINRA Arbitration Award

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According to a article that appeared in yesterday’s (March 31, 2009) Wall Street Journal, Merrill Lynch In was hit with one of the biggest awards levied against a Wall Street by a The Financial Industry Regulatory Authority arbitration panel. The firm has been ordered to pay $39.8 million in a case that grew out of the collapse of financial firm Refco Inc. The FINRA panel awarded $30.6 million in compensatory damages and $9.2 million in interest to the
trustees of the Masonic Hall and Asylum Fund in Utica, N.Y.

The fund is an endowment for a health-care facility in Utica. It filed a claim against Merrill Lynch, now a unit of Bank of America Corp., alleging a subsidiary broker-dealer advised it to purchase a limited partnership interest in Sphinx Managed Futures Index Fund LP, a privately held fund in a business unit of Refco Inc.
Refco collapsed after announcing in 2005 that its chief executive hid $430 million in bad debts from the company’s auditors.

Merrill Lynch released a statement saying it was disappointed with the ruling.
It said the case arose from investments that predated Merrill Lynch’s 2005 acquisition of a regional broker-dealer, Advest, which had provided the Masonic fund with investment advice.

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